Developed in 1969, the Anglesea power station previously supplied 40% of the power needs for the Point Henry smelter in Geelong, Victoria.

It shut down the Point Henry smelter last year at a time when the aging plant was not performing in a depressed metals environment.

The smelter had a production capacity of 185,000 tonne per annum aluminium a year.

In February, Alcoa tested the market, but the brown coal operation’s age and reputation as one of Victoria’s dirtiest polluting operations weren’t see as attractive.

“Our key concern now is for our 85 employees who have done a great job in continuing to run the operation during this period of uncertainty,” Alcoa Australia managing director Alan Cransberg said.

“Alcoa has been a proud member of the Anglesea community for more than 46 years, and our focus is in supporting our employees and their families, our contractors, suppliers and community partners through this transition,” the aluminium-making company said.

The news will be welcomed by campaigners in the Geelong community who have long-campaigned for the power plant to be shut down.

Since 2011 Alcoa and the Anglesea power station have come under increasing local criticism, with residents forming the Surf Coast Air Action group concerned with health impacts of air pollution from the mine and power station

They say Anglesea pumps 43 million kilograms of sulphur dioxide into the air each year.

While it is just one tenth of the size of the Hazelwood power station in Victoria’s LaTrobe Valley, Angelsea emits three times the total volume of sulphur dioxide.

Recent research by Harvard University found that the Anglesea plant cost the public more than $231 million a year in health and environmental impacts.

There had been signs Angelsea may have continued to generate power. Alcoa had received approvals to sell energy into the national electricity market, and the mining licence was renewed for 50 years.

Friends of the Earth, which organised two major protests in Anglesea, including over 500 people making up a human sign on the beach at Anglesea saying 'Shut it Down' in July, thanked Alcoa for responding to a strong community campaign by Surf Coast Air Action.

"We welcome Alcoa's decision. It respects the community's vision," Friends of the Earth's renewable energy spokesperson Leigh Ewbank said.

"Alcoa's decision sets a precedent. It shows that community can revoke the social licence for coal to operate."

"The Anglesea community's campaign effectively made this polluting coal plant a stranded asset.

“Coal operators must be wondering which coal-affected community will be next to revoke the social licence."

It expects to record 2015 restructuring-related charges of $30-$35 million after-tax. Total Alcoa of Australia restructuring related charges associated with the closure of the Anglesea coal mine and power station are expected to be around $US42 million after tax.

Alcoa’s free cash flow target for 2015 of $500 million remains unchanged.

Shares in Alcoa dropped 2.3% to $A20.90.